Magazine article Diverse Issues in Higher Education

Higher Education Stakeholders Press for Reductions in Student Loan Interest Rates

Magazine article Diverse Issues in Higher Education

Higher Education Stakeholders Press for Reductions in Student Loan Interest Rates

Article excerpt

As partisan battles over budgets and taxes continue on Capitol Hill, the next flashpoint for debate may be one issue with huge implications for higher education: the interest rate on federal student loans.

With rates on subsidized loans set to double on July 1--potentially raising the average debt by $2,800 for 7 million students--consumer advocates and student groups are calling for the House of Representatives and the Senate to halt the increase. The United States Student Association, or USSA, U.S. PIRG and other organizations in March presented more than 130,000 student signatures to Congress protesting the planned increase from 3.4 percent to 6.8 percent.

Yet as critics of excessive federal spending call for curbing uncontrolled spending on education and other programs, the pending rate increase is a source of tension in an already heated presidential election year.

"For the average student and the average parent, the interest rate is a huge issue," said Rich Williams, higher education advocate at U.S. PIRG. Combined with state cuts in higher education spending and an uncertain job market, "It's basically a triple whammy for students and families," he told Diverse.

Without congressional action, the rate hike would affect millions of students and their families for the fall 2012 semester, he said. President Obama already has called on Congress to extend the 3.4 percent interest rate set by Congress in 2007.

"A rate of 6.8 percent was a good deal when the economy was good," Williams said. "Now it's very high compared to what people might get from other sources."

While a one-year fix of the interest rate is a short-term goal, however, students need a long-term solution to mounting debt, said Victor Sanchez, president of the United States Student Association.

Sanchez supports the new Struggling Students Act, which would allow many students to discharge their loans after 10 years if they make timely payments. The bill also would allow students to discharge private sector student loans in bankruptcy, a right not currently available to borrowers.

"You can discharge gambling debts in bankruptcy but not private student loans," Sanchez told Diverse. "We're giving basic consumer protections to gamblers but not to students."

While USSA supports a short-term "fix" on the interest rates, he said, "That's just scratching the surface of the problem." Rising tuition, declining state aid, a tight job market and families' inability to pay for college are combining to make college unaffordable for more students, he added. …

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